Can FuelCell Earnings Break Into the Black?

FuelCell Energy (NASDAQ: FCEL  ) will release its quarterly report on Wednesday, and investors have patiently waited for the company to turn a profit. Yet from all indications, it looks as though shareholders will have to wait a bit longer before FuelCell earnings turn positive.

Fuel cells have generated plenty of interest over the past decade, as attention has increasingly shifted away from massive industrial-scale projects and toward more modest localized power solutions. Yet even with some significant successes, FuelCell hasn't managed to produce the growth it needs in order to cover all of its costs. Let's take an early look at what's been happening with FuelCell Energy over the past quarter and what we're likely to see in its report.

Stats on FuelCell Energy

Analyst EPS Estimate

($0.03)

Year-Ago EPS

($0.06)

Revenue Estimate

$42.96 million

Change From Year-Ago Revenue

45%

Earnings Beats in Past 4 Quarters

1

Source: Yahoo! Finance.

When will FuelCell earnings break even?
Analysts have gotten the tiniest bit more optimistic about FuelCell earnings, boosting both their July quarter estimates and their full-year fiscal 2013 projections by a penny per share. The stock, though, hasn't done well lately, giving up 14% of its value since late May.

FuelCell Energy came into the quarter on a fairly positive note, posting a narrower than expected loss in its April quarter on record revenue. Revenue in its advanced technologies division doubled from the previous year, due largely to an unmanned aerial solid-oxide fuel-cell development program with Boeing (NYSE: BA  ) having come via FuelCell's buyout of Versa Power Systems. Moreover, backlogs more than doubled to $410 million, with a large order from POSCO's (NYSE: PKX  ) POSCO Energy subsidiary and FuelCell's Bridgeport fuel-cell project with Dominion Resources (NYSE: D  ) accounting for most of the gains.

Since then, however, the company has been fairly quiet. A convertible bond offering to raise capital hurt the stock, with FuelCell having to pay 8% interest rates on five-year notes as well as giving bondholders the right to convert to shares at a price of $1.55.

But the real threat to FuelCell comes from alternative methods of producing localized energy. The rise of residential solar systems offers many of the same advantages as FuelCell's systems, albeit with greater reliance on the availability of sunlight to provide power. FuelCell offers the advantage of always producing available power regardless of weather conditions, but it still needs to convince users that its solutions are superior to alternatives.

In the FuelCell earnings report, watch to see whether the company has made much progress signing up new customers. Without a steady stream of new projects, FuelCell won't be able to produce the growth it needs to become profitable in the future.

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